Change In Contract Payment Terms After Award
Started by AlwaysLearning122 · Aug 15, 2022 · 2 replies
- AOriginal post
AlwaysLearning122
Aug 15, 2022 · 3y ago
I have asked my KO if we could change the payment terms for our training CLINs from a single instance, to milestone payments. Currently, these CLINs are FFP with a Lot unit, and Qty of 1 and are billed at completion (the RFP also reflected the same Lot & Qty). These training CLINs take place approximately 2 weeks out of each contract year--However, we begin obligating money as early as 180 days prior to the training start date to reserve the necessary vendor services for these trainings
The KO has expressed concern that changing the payment terms from Lot to Milestone is unfair to the loosing bidders and negates the competitive nature of the bid. The KO is looking into this to confirm.
I have renegotiated payments terms on other competitive contracts with no issues in the past, but wanted to reach out to this community and get your thoughts. Thanks in advance.
- W
Witty_Username
Aug 16, 2022 · 3y ago · edited 3y ago
I think it would still be appropriate to apply a "scope of the competition" test to determine whether changing the payment terms would constitute an out of scope modification, even though most of the examples I found involved adding work to a contract, not changing pricing arrangements. Would potential offerors have reasonably anticipated this change? Does it result in a contract which is substantially different from that originally competed (B-200722)?
To answer those questions I think you'd need to consider a couple of things including:
-Were there any communications with potential offerors regarding the payment structure, e.g. did anyone ask whether milestone payments were available, or did anyone express concern over waiting until all performance was complete to invoice?
-Do the companies in this industry or who proposed generally have the resources on hand to perform a requirement of this magnitude, or is it likely that they would have to obtain financing or price inflation or other cost risk into their proposal based on the lack of interim payments?
- C
C Culham
Aug 16, 2022 · 3y ago
AlwaysLearning122 said:
I have renegotiated payments terms on other competitive contracts with no issues in the past
So my immediate thought was this - If the solicitation was still on the street and you wanted to change the payment terms as you note would you think it would be appropriate to issue an amendment to the solicitation or just wait until you are ready to award to a certain contractor and and then just change the terms willy nilly?
I am sure your CO will conclude on what they are willing to do and might even entertain the request. But I wonder, is the contractor asking for the change? And why if so? Remember many payments under contracts are in truth "contract financing" a method from preventing the contractor from having to fund the contract themselves, incur finance fees etc and pass them on to the Government. This goes to the second bullet of @Witty_Username comments.
Lots to consider and it depends!